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Bank Lending Channel and the Monetary Transmission Mechanism: the Case of Chile

Author

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  • Rodrigo Alfaro
  • Helmut Franken
  • Carlos García
  • Alejandro Jara

Abstract

This paper analyses the evidence about the bank-lending channel in Chile during the period 1990- 2002 using data from both the banking sector and the corporate sector. First, we estimate a panel data of banks to identify shifts in the loan supply curve in response to changes in monetary policy. Second, taking into consideration the evidence gathered in the previous step, we construct an aggregate variable aimed to capture the main forces behind the bank lending channel, and we estimate a VAR system to test whether or not this channel exacerbates the effect of a monetary policy shock over macroeconomic activity. We conclude that the bank-lending channel has operated as a monetary policy transmission mechanism in Chile during the sample period, having an independent and significant effect in terms of macroeconomic activity.

Suggested Citation

  • Rodrigo Alfaro & Helmut Franken & Carlos García & Alejandro Jara, 2003. "Bank Lending Channel and the Monetary Transmission Mechanism: the Case of Chile," Working Papers Central Bank of Chile 223, Central Bank of Chile.
    • Handle: RePEc:chb:bcchwp:223
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    References listed on IDEAS

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    Cited by:

    1. Óscar Alberto Díaz-Quevedo & C. Tatiana Rocabado-Palomeque, 2018. "Does Monetary Policy Affect Bank Lending? Evidence for Bolivia," Investigación Conjunta-Joint Research, in: Alberto Ortiz-Bolaños (ed.), Monetary Policy and Financial Stability in Latin America and the Caribbean, edition 1, volume 1, chapter 2, pages 9-40, Centro de Estudios Monetarios Latinoamericanos, CEMLA.
    2. Xiong, Qiyue, 2013. "The role of the bank lending channel and impacts of stricter capital requirements on the Chinese banking industry," BOFIT Discussion Papers 7/2013, Bank of Finland Institute for Emerging Economies (BOFIT).
    3. Adel Boughrara & Samir Ghazouani, 2010. "Is There A Bank Lending Channel Of Monetary Policy In Selected Mena Countries? A Comparative Analysis," Middle East Development Journal (MEDJ), World Scientific Publishing Co. Pte. Ltd., vol. 2(02), pages 251-282.
    4. Cristina Betancour & José De Gregorio & Juan Pablo Medina, 2008. "The "great moderation" and the monetary transmission mechanism in Chile," BIS Papers chapters, in: Bank for International Settlements (ed.), Transmission mechanisms for monetary policy in emerging market economies, volume 35, pages 159-178, Bank for International Settlements.
    5. Fernando Lorenzo & Alfonso Capurro & Guillermo Carlomagno & Paula Garda & Bibiana Lanzilotta & Gonzalo Zunino, 2010. "El canal de crédito, evidencias para Uruguay desde una perspectiva macroeconómica," Documentos de trabajo 2010021, Banco Central del Uruguay.
    6. Sebastián Becerra & Gregory Claeys & Juan Francisco Martínez, 2016. "A new liquidity risk measure for the Chilean banking sector," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 19(3), pages 026-067, December.
    7. Leontieva, E.A. & Perevyshin, Y.N., 2015. "Credit Channel of Monetary Policy Transmission in Russia," Published Papers 431505, Russian Presidential Academy of National Economy and Public Administration.
    8. Adebayo Augustine Kutu & Harold Ngalawa, 2016. "Monetary Policy Shocks And Industrial Output In Brics Countries," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 66(3), pages 3-24, July-Sept.
    9. Kirsten L. Ludi & Marc Ground, 2006. "Investigating the Bank-Lending Channel in South Africa: A VAR Approach," Working Papers 200604, University of Pretoria, Department of Economics.
    10. Muhammad Naveed Tahir, 2012. "Relative Importance of Monetary Transmission Channels in Inflation Targeting Emerging Economies," EcoMod2012 4092, EcoMod.
    11. Mariya Gubareva & Maria Rosa Borges, 2013. "Typological Classification, Diagnostics, and Measurement of Flights-to-Quality," Working Papers Department of Economics 2013/15, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    12. repec:zbw:bofitp:2013_007 is not listed on IDEAS
    13. Héctor Bravo L. & Carlos García T. & Verónica Mies M. & Matías Tapia G., 2003. "Heterogeneity in Monetary Transmission: Sectoral and Regional Effects," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 6(3), pages 5-26, December.
    14. Zulkhibri, Muhamed, 2012. "Policy rate pass-through and the adjustment of retail interest rates: Empirical evidence from Malaysian financial institutions," Journal of Asian Economics, Elsevier, vol. 23(4), pages 409-422.
    15. Xiong, Qiyue, 2013. "The role of the bank lending channel and impacts of stricter capital requirements on the Chinese banking industry," BOFIT Discussion Papers 7/2013, Bank of Finland, Institute for Economies in Transition.

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